July 30, 2010

All on the table except property tax hike as City Hall deals with record shortfall

Mayor Richard Daley is sticking to his promise not to raise property taxes next year, but he’s looking at all other options to eliminate a record budget shortfall of more than $654 million, city officials said Friday.

Pay hikes and increased health care costs for city workers are expected to push City Hall spending to $6.3 billion — $207 million more than this year. But there’s not enough money to cover that level of spending, Budget Director Gene Munin acknowledged.

“We are first going to consider the expense side of the budget,” Munin said. “We haven’t taken any other revenue items off the table.”

With city elections looming in February, there’s political pressure to balance the budget without hitting voters too hard in the pocketbook. One idea is to revive a plan to lease Midway Airport and reap a one-time windfall. And some aldermen advocate tapping the $700 million or so stored in 159 special taxing districts.

There is about $1.2 billion in those funds, and only $500 million of that has been committed to specific projects in the districts, which are designed to bring blighted areas back to life. If that $700 million was declared surplus, about half would go to the schools and about a fifth to the city.

“There’s money still there, and if times were good, I would say continue using the TIF funds to spur development and build projects,” said Ald. Thomas Allen, 38th, who has advocated drawing on the TIF funds for some time. “Since times are not good and we have this recurring revenue stream available to us, we should use that revenue.”

Daley historically has resisted drawing from that pool of tax-increment financing money, but Munin said the administration is at least discussing the idea. “There’s obviously a price to be paid if you do that,” he added. “That’s an economic development tool.”

Other aldermen, however, spoke against that idea at a budget-discussion meeting this morning, said Ald. Robert Fioretti, 2nd, who also backs the idea. They feared that needed projects in their wards would not get done without TIF funds, he said.

In TIF districts, property taxes paid to local governments are frozen for up to 23 years, and any additional tax collections are used to build infrastructure that promotes economic development. Those additional funds — the increment — can be declared surplus and given to the local governments.

A proposed deal to lease Midway for 99 years for a payment of $2.5 billion fell through last year when the investors could not secure funding. The Federal Aviation Administration today granted the city its fourth extension in its deadline to make a new lease deal. The new deadline is Nov. 30.

In this year’s budget, Daley and aldermen dipped deep into onetime reserves. They are spending nearly $600 million from the city’s long-term leases of the parking meter system and the Chicago Skyway — leaving the city with only $730 million of the $3.15 billion generated from those deals.

Munin, however, said the city will spend $60 million less this year than expected, leaving $790 million of those funds in the city’s coffers. Drawing down those funds much further could hurt the city’s bond rating and thus increase the costs of borrowing money.

Budget cuts won’t come easy either ahead of an election.

Not included in the projected budget shortfall is the cost of a recent U.S. Supreme Court decision that 1995 firefighters’ entry exams resulted in discrimination. That verdict is expected to cost the city between $45 million and $100 million.

At private briefings Friday, aldermen advocated for the expansion of the stalled recycling program and putting more cops on the street. The police department already is 700 officers short.

“Everybody was talking about more police,” said Ald. Richard Mell, 33rd.

Many city workers already are taking 24 unpaid days off and are going to be asked to do so again next year.

Laurence Msall, president of The Civic Federation, a government budget watchdog group, said spending down onetime lease proceeds is unwise, and the benefits of declaring a surplus in the special taxing districts are limited.

“The city has to restructure, re-prioritize what services are essential,” he said. “There’s no way personnel reductions can be avoided, including in public safety.”

Daley plans to hold three public meetings late next month to discuss the budget. His complete, formal budget proposal is due in October, and the City Council must approve it before the end of the year.

All 50 aldermen on the Chicago City Council had to file paperwork earlier this year detailing their outside income and gifts. The Tribune took that ethics paperwork and posted the information here for you to see. You can search by ward number or alderman's last name.

The Cook County Assessor's office has put together lists of projected median property tax bills for all suburban towns and city neighborhoods. We've posted them for you to get a look at who's paying more and who's paying less.

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